What to take away
- Only the business part of an expense is deductible, so mixed records make every claim harder to support.
- A corporation is a separate entity: personal use of company money can create a shareholder benefit or loan with tax consequences.
- Dedicated accounts, a regular way of paying yourself and a note for every exception do most of the work.
Why mixed money creates problems
The CRA requires you to keep records that support the income and expenses you report, and it says you cannot deduct personal expenses. Where a cost has both uses, you enter only the business part. If business and personal spending run through the same account, every deduction has to be sorted out afterwards, usually from memory.
Mixed records also affect decisions. Profit is harder to see, GST/HST you owe is harder to identify, and a lender reviewing your statements has more to question. BDC notes that banks look at both personal and business credit when assessing a business loan, so clean business records and a clean personal history help the same application.
If you are a sole proprietor
A sole proprietorship is not a separate corporation, and its income is reported on your personal return. Separation is therefore a record-keeping choice rather than a legal one. It is still worth making. The CRA tells self-employed people to keep duplicate deposit slips, bank statements and cancelled cheques, and to keep separate records for each business they run.
A dedicated business account and card give you those records without sorting. Move money to yourself by transfer on a regular schedule, and label it as an owner draw. Our article on home office expenses for self-employed people and the self-employed Ontario tax basics guide show which mixed-use costs you can claim and how.
If you are incorporated
A corporation is a separate legal and tax entity, which is why its money needs to stay apart from yours. The CRA’s folio on shareholder loans explains that shareholders are generally taxable on amounts they receive from a corporation. If you borrow from the company because of your shareholding, the amount is generally included in your income for the year unless an exception applies, and some exceptions depend on repayment within a set period.
Where the corporation pays a personal expense and there is no agreement to repay it, the folio says a benefit conferred on the shareholder may need to be included in income instead. In practice, a company card used for groceries can trigger one of these outcomes. Our article on incorporation setup and the shareholder loan entry in the encyclopedia cover the basics. Because the rules have exceptions, discuss any loan with your accountant before it happens.
Open accounts that keep the lines clear
At minimum, use a business chequing account and a card used only for business purchases. If you are incorporated, ask your bank how to open the accounts in the corporation’s name. If you collect GST/HST, some owners also keep a separate savings account for tax owing, which supports the point in our article on GST/HST collected not being spending money.
BDC suggests that you use business loans, a business line of credit and business credit cards only for business purposes such as investments, supplies and working capital. Keeping borrowing separate also makes interest easier to identify when you or your accountant prepare the return.
Pay yourself in a way that leaves a record
Taking money from the business ad hoc is how separate accounts become one again. Pick a method that suits your structure and use it consistently. A sole proprietor takes draws, which are not an expense. A corporation can pay salary, which needs payroll deductions, or dividends, which have their own paperwork, or reimburse documented costs you paid personally.
Our salary vs dividends guide explains the trade-offs. Whichever method you choose, make each payment identifiable by date, amount and type. For example, if you pay $1,000 of company supplies on a personal card, record a reimbursement of $1,000 backed by receipts rather than transferring a round sum with no explanation. The numbers here are illustrative.
Handle mixed-use costs deliberately
Some costs cannot be fully separated: a phone, a vehicle, internet or space at home. The CRA expects you to claim only the business portion and to keep records that support how you calculated it. For vehicles, that means a logbook; for a home workspace, it means measuring the space and keeping the expense bills.
Decide the method once, apply it every year, and write down the basis. Our articles on vehicle expenses and logbook rules and on home office expenses show what the CRA looks for. The same logic applies to GST/HST: you cannot claim an input tax credit for property or services bought for personal use.
Cleaning up when the two have already blended
Start with the bank and card statements for the period involved. Mark each transaction as business, personal or unclear, then gather receipts for the business items. For unclear items, write a short note rather than guessing. Do not create documents after the fact; ask suppliers for copies of invoices you cannot find.
If you are incorporated, list every personal item paid by the company and every company item paid personally. The net amount can show up as a balance owing to or from you, and your accountant needs to see it to decide the right treatment. Sora’s bookkeeping service can help with the cleanup, and a conversation about timing is better held before the year-end than after.
Keep it simple enough to maintain
A system you will not maintain is no better than none. Set a weekly slot to review transactions, keep receipts in one place, and ask your bookkeeper or accountant to review owner transactions each month or quarter. See our article on what bank statements do not tell your accountant for what to explain.
Bring statements for every account, the shareholder or owner account balance, and a list of unusual transactions to your next meeting. Our year-end checklist and bookkeeping month-end guide cover the rest of the routine.
Sources & editorial notes
Sources checked October 24, 2026. The examples are illustrative and provide general information. Discuss how the guidance applies to your circumstances with your accountant.
- Business recordsCanada Revenue Agency
- Business expensesCanada Revenue Agency
- Income Tax Folio S3-F1-C1: Shareholder loans and debtsCanada Revenue Agency
- Input tax creditsCanada Revenue Agency
- How a bank looks at your businessBDC
Rules and guidance can change. Use the current official source and confirm the treatment for your facts. To flag an error, contact Sora.